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Report on the impact of the 1 July 2014 financial reforms on the aged care sector November 2014 Report
Report on the impact of the 1 July 2014 financial reforms on the aged care sector
November 2014 Report
IntroductionThis is the Aged Care Financing Authority’s (ACFA’s) November report on the impacts of the 1 July 2014 financing reforms.
This report updates previous reports by including analysis of the fourth round of data with respect to accommodation payments (covering the month ending 31 October), collected through ACFA’s survey of aged care providers. It also includes an analysis on occupancy and admissions data collected by the Department of Social Services (DSS). To complement the data collection, ACFA has also continued to engage with sector representatives, providers and the DSS to obtain information and feedback on the impact of the reforms.
This report is split into three parts: Part 1 – Accommodation Payments Part 2 – Access to Care Part 3 – Support for the sector and consumers in transition
Key Findings
1. Accommodation Payments – Key Findings In October, Lump Sum Refundable Accommodation Deposits/Contributions (RADs)
continued to be the preferred method of making accommodation payments , with a share of 44% (representing 3% greater share than that of September).
The second most preferred method of making accommodation payments was the Periodic Daily Accommodation Payments/Contributions (DAPs), with a share of 32% (representing 3% lesser share than that of September).
About 25% (a growth of 1% over September) of residents chose to pay a combination payment with a RAD and DAP components.
Consumer choice of accommodation payment – July to October 2014
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The month of October recorded a monthly increase of 0.6% in the overall pool of lump sum accommodation payments held and receivable.
RADs1 have consistently offset the accommodation bonds paid out for departing residents in each month after July 2014.
The overall pool of lump sum accommodation payments held or receivable grew by 2.3% between 30 June 2014 and 31 October 2014.
ACFA notes that while the lump sum pool growth is likely to be directionally correct, the actual growth amount needs to be treated with caution as this is based on a voluntary survey and there may be underlying bias in responses and other data quality issues.
Lump sums held and receivable (including bonds receivable at 30 June 2014 of $3.2 billion)
2. Access to Care
This report includes high level data on admissions and occupancy levels in residential care sourced from preliminary departmental data. ACFA will continue to build on this analysis in future reports as more detailed data and analysis become available. It will take some time to build a suitably robust data set on care entry trends against income and wealth.
As mentioned in previous reports, there was a spike in overall admissions to residential care pre 1 July 2014 – in May and June – followed by lower than usual admissions in July and August. An increase in respite admissions and fewer permanent admissions was also evident in July and August.
In September and October 2014, the number of permanent admissions showed signs of returning to levels at par with the pre May 2014 levels. The spike in admissions in May and June and the trough in July and August has seen the total number of residents return to the same levels as seen in the first few months of 2014 with around 170,000 permanent residents.
1 Including the RAD component of combination payments
2
The number of respite admissions remains relatively high. There is usually a mid–year increase in the number of respite residents which tapers off towards the end of the calendar year. Due to the 1 July changes this peak was significantly amplified. The drop in October respite admissions is an indication that the number of respite admissions will taper down in the next couple of months.
Trends in admission to residential care
ACFA will continue to monitor these impacts in coming months to determine the extent to which issues are transitional or permanent in nature. ACFA notes that the Department of Human Services (DHS) has advised the sector that additional resources have been directed towards reducing administrative delays in means testing assessments . This may reduce the temporary usage of respite care while waiting for an assessment prior to entering permanent residential care.
Occupancy in residential care and home care have been nearly constant, with an insignificant decline.
3. Support for the sector
The Transitional Business Advisory Service continues to provide support for providers with the transition to the new accommodation payments arrangements. Relevant departments have also been updating and distributing additional information materials to clarify reform implementation issues. The DHS has made available a dedicated phone line for persons concerned over delays in means test assessments and allocated additional resources to reduce delays in issuing assessments.
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Part 1. Accommodation Payments
IntroductionThe following section monitors the impact of the new accommodation payment arrangements.
Figure 1 describes the changes to the accommodation payment arrangements.
ACFA has identified two primary areas of focus for monitoring the impacts of the accommodation payment arrangements.
The first is the overall change in lump sum payments held or receivable by providers. As can be seen from Figure 1, people that would have previously entered care with an agreement to pay a lump sum accommodation bond now have the flexibility to choose how they pay for their accommodation (RAD, DAP or combination) after moving into care when they have security of tenure. If incoming residents have a preference for DAPs, this could potentially leave providers who have thin equity - where the capital infrastructure is largely funded by bonds -potentially exposed to liquidity problems if there is an outflow of lump sum accommodation payments. On the other hand, around a quarter of residents who would have formerly been limited to paying by periodic payment, now have the option to pay by lump sum. This is likely to see an increase2 in the overall amount of lump sum payments held by the sector.
The second is the overall change in the price that providers can now receive for providing accommodation. The pricing regime has been significantly deregulated. For many providers there is potential uplift in accommodation prices - particularly those previously providing non–extra service high care. The new arrangements give people entering care more transparency in what is on offer and they can use this information to better choose accommodation that suits their needs. Further the higher accommodation supplement for new and significantly refurbished homes will provide a better return for eligible providers choosing to take supported residents.
ACFA will monitor both of these impacts. The currently available data is collected through a survey of providers and focuses on lump sum payments (the first area of focus outlined above). The results of this survey are considered in the following section. As data becomes available ACFA will expand its monitoring to both areas of interest.
ObservationsPrior to 1 July 2014 there were concerns expressed by the sector that there would be a ‘flight from bonds’. ACFA has monitored this situation through the accommodation payment survey and by seeking feedback from the sector. Both prongs of this monitoring indicate that, at this stage, this concern has not been realised and in fact there has been a continued growth in lump sum payments.
The directional growth in lump sums held and receivable is consistent with earlier modelling undertaken by KPMG on behalf of ACFA. This modelling projected that the lump sum pool held by providers would increase by around $3.0 billion in 2014-15. Between June and
2 See KPMG Report Modelling of Financial Impacts of the Aged Care Reforms (https://www.dss.gov.au/our-responsibilities/ageing-and-aged-care/aged-care-reform/reforms-by-topic/aged-care-financing-authority/aged-care-financing-authority-past-advice). This report projected a net increase of $3.0 billion in lump sum holding in 2014–15 due to the new accommodation payment arrangements.
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October, the survey results indicate that the lump sums held and receivable has increased by $0.442 billion. This is below what would be expected from the KPMG modelling, but there is not yet sufficient data to make a reliable projection. As reported last month, the increase in lump sums is not uniform across the sector. There has been a continued decrease in lump sums held and receivable for a small number of services predominantly providing extra-service care and low care (7.2% and 9.5% respectively since June).
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Figure 1: Change in accommodation payment arrangements
Pre–1 July 2014 At 30 June 2014 From 1 July 2014Non–supported residents Paid by Accommodation Bonds
o Residents enter either Low care and extra–services care
o Price capped at total assets of resident less minimum asset amount.
o Can be paid by lump sum, periodic payment, or combination - method agreed before entry.
o A retention amount of up to $331 per month for up to five years
Paid by Accommodation Chargeo Residents enter non–extra service high careo Periodic payment onlyo Price set by regulation capped at $34.20 per
day
Supported residents The asset test restricted the amount that a supported
resident could be asked to pay with the Government topping this up with an accommodation supplement.
The accommodation payment methods were accommodation bonds for partially-supported people entering low care and an accommodation charge for those partially-supported people entering high care.
Government contribution capped at $34.20 per day.
174,000 permanent residents3: 104,000 (approx 60%) non-
supported 73,000 (approx 42%) Bond payers $15.4 billion (approx) bond pool The average accommodation bond
agreed with a new resident in 2013-14 was $296,404
47,000 (approx 27%) non-supported residents paying by accommodation charge
Total (supported & non–supported) turn–over of around 5,000 residents per month with around 3,000 per month being non–supported residents.
Non–supported residents All incoming residents pay under the same
accommodation payment arrangements. Providers set maximum accommodation price Prices over $550,000 ($99.90 per day) to be agreed
by Pricing Commissioner. Provider and resident agree accommodation price
at entry (not related to residents assets). Resident has 28 days to decide method of
payment. Options are:o Refundable Accommodation Deposit (RAD);o Daily Accommodation Payment (DAP); oro A combination of DAP/RAD (with resident
determining the proportional split). No regulated retention however residents paying by
combination can agree to a non–refundable DAP component being drawn from RAD.
Supported residents All incoming supported residents pay under the
same accommodation contribution arrangements. The provider receives the same amount for all
residents when accommodation contribution and accommodation supplement are added together.
Providers of new or significantly refurbished facilities are eligible for total payment for accommodation at the same level as the higher accommodation supplement ($53.04 per day).
3Noting there was an influx of (~3,000) permanent residents in the months prior to July 2014.
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Survey of residential care providersThis report presents data collected from residential aged care providers through a monthly voluntary survey. Residential aged care providers were invited to participate in a voluntary survey that collected information on the choice of accommodation payment method and the changes in the lump sum accommodation payments held and receivable. Survey forms were sent to all providers, with responses submitted to a third party who de–identified the results before providing them to ACFA.
The survey to date has collected data on:
1. the numbers of accommodation bonds held and their value at 30 June 2014;2. the numbers of bonds/RADs held and their value at the end of July, August,
September and October 2014;3. the numbers of RAD, DAP and combination payment options chosen by residents in
July, August, September and October 2014.
Survey forms covering October were received from 1,019 services (70,539 places). The results for October 2014 cover less than half of the sector (37% of services; 37% of places). Consistent and comparable results for all the months from June 2014 to October 2014 cover about a third of the sector (33% of services; 32% of places).
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Choice of accommodation payment and changes to the lump sum
poolKey findings are summarised below at aggregate level and by various sector segments. Further detail is provided at Attachment A.
Aggregate results for total sector In October, the proportion of residents choosing to pay by RADs (44%) continued to
dominate all accommodation payments. About a quarter of residents chose to pay a combination payment with a RAD and
DAP component. There was an increase in the total lump sums (bonds and RADs) held or receivable of
about 0.6% or approximately $119 million in October over September. There was an increase in the total lump sums (bonds and RADs) held or receivable of
about 2.3% or approximately $442 million from 30 June to 31 October.
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Geographical analysisRADs are more favoured in major cities than other geographic areas.
Choice of payment Change to the lump sum poolService location
Compared to the other areas, there was a greater preference toward RADs in major cities. Inner regional areas also recorded a preference for RADs for the first time.
The national increase in lump sum payments held or receivable between September and October can be mainly attributed to the increase recorded outside major cities. Major cities recorded no growth.
Table 1: Survey coverage – October 2014
National Major City Inner Regional Outer regional / Remote / Very remote
Services (n,%) 897 (33%) 556 (33%) 214 (33%) 127 (32%)
Places (n,%) 61,189 (32%) 42,203 (32%) 13,737 (33%) 5,249 (32%)
Figure 2 Consumer choice of accommodation payment by location
Table 2: Lump sums value growth by service location – October 2014
Major City Inner Regional Outer regional / Remote / Very remote
September to October 0.0% 3.3% 2.5%June to October 2.1% 3.3% 3.6%
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Service ownership analysisThe proportion of people choosing to pay a RAD increased in all ownership segments.
Choice of payment Change to the lump sum poolService ownership
RADs continue to be preferred in the For–Profit sector, with over half of all new residents choosing this method. Between September and October, RADs gained share in all the ownership sectors.
For-profit providers have recorded the lowest growth (0.3%) in lump sum payments. Government sector services recorded 6.0% increase in lump sum payments held or receivable between June and October.
Table 3: Survey coverage by ownership type – September 2014
Total Not-For-Profit For-Profit Government
Services (n,%) 897 (33%) 556 (33%) 214 (33%) 127 (32%)Places (n,%) 61,189 (32%) 42,203 (32%) 13,737 (33%) 5,249 (32%)
Figure 3: Consumer choice of accommodation payment by ownership type
Table 4: Lump sums value growth by ownership type – September 2014Not-For-
Profit For-Profit Government
September to October 1.3% -0.2% 2.4%June to October 4.3% 0.3% 6.0%
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Care type4 analysisThe impact of accommodation payment choices is likely to vary between providers by the type of care traditionally offered, noting that former low care places would have been characterised by payment of lump sum bonds prior to 1 July 2014 and (non–extra service) high care facilities by daily accommodation charges. In August, RAD was the preferred method of making accommodation payments across all former care types (see Figure 3B). However in September and October, DAP and combination payments were the preferred payment types in low care.
Choice of payment Change to the lump sum poolCare type In September and October, DAPs and
combination payments took over from RADs as the preferred accommodation payment type in low care. RADs remain preferred in mixed care and high care.
Between September and October, only low care recorded a decline in lump sum pool.
Table 5: Survey coverage – October 2014Total High Care Mixed Care Low Care
Services (n,%) 897 (33%) 640 (32%) 227 (38%) 30 (28%)Places (n,%) 61,189 (32%) 46,984 (31%) 13,064 (37%) 1,141 (29%)
Figure 4: Consumer choice of accommodation payment by previous care type classification
Table 6: Lump sums value growth – October 2014High Care Mixed Care Low Care
September to October 0.6% 1.1% -3.2%June to October 2.3% 4.2% -9.5%
4 High and low care classifications are based on over 70% of care days being delivered with an ACFI classification of high or low care respectively.
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Facility size analysisThe proportion of residents choosing to pay by DAPs decreased between September and October across all service size categories, the reverse to what happened between August and September. RADs recorded growth in medium sized services only. Half of residents entering large services chose to pay by RAD
Choice of payment Change to the lump sum poolNumber of places
In October, RADs was the preferred payment method for large and medium sized services. RADs continue to lose its share in small services, where combined payment has gained 7% share.
Between September and October, all size groups of services recorded growth in their lump sum pool.
Table 7: Survey Coverage – October 2014Total 1-49 places 50-99 places 100+ places
Services (n,%) 897 (33%) 314 (34%) 409 (34%) 174 (28%)Places (n,%) 61,189 (32%) 10,575 (35%) 28,820 (35%) 21,794 (29%)
Figure 5: Consumer choice of accommodation payment by facility size
Table 8: Lump sums value growth by facility size – October 20141-49 places 50-99 places 100+ places
September to October 1.8% 0.6% 0.3%June to October 4.0% 3.0% 1.4%
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Provider size analysisThe growth in the value of lumps sums held and receivable grew most rapidly for single-home providers and remained nearly flat for medium and large providers. Interestingly though, medium and large providers had experienced a growth of around 2.5% and 2.4%, respectively in September.
Choice of payment Change to the lump sum poolProvider size In October, RAD continued to be the
preferred method of payment among all three sizes of providers, gaining a significant share among large providers
Only medium sized providers recorded a decline in their lump sum pool in October over September
Table 9: Survey Coverage – October 2014
Total Single home Two – Six homes Seven or more homes
Services (n,%) 351 (34%) 219 (33%) 100 (33%) 32 (41%)Places (n,%) 61,189 (32%) 14,727 (32%) 17,004 (31%) 29,458 (33%)
Figure 6. Consumer choice of accommodation payment by provider size
Table 10: Lump sums value growth by provider size – October 2014
Single home Two – Six homes Seven or more homes
September to October 2.4% -0.4% 0.5%June to October 2.4% 1.6% 2.8%
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Extra service v non extra service5
Under the previous arrangements, a resident entering a high care extra service place could be asked to pay a lump sum bond. Extra-service facilities continue to report a decline in the amount of lump sums held and receivable.
Choice of payment Change to the lump sum poolExtra service RADs regained a significant
share in October after a consistent decline between July and September
Between September and October, there was an increase in the amount of lump sum payments held or receivable across all categories except the extra service category.
Table 11: Survey Coverage – October 2014Total Extra Service Mixed Non Extra Service
Services (n,%) 897 (33%) 29 (28%) 21 (28%) 847 (33%)Places (n,%) 61,189 (32%) 2,343 (29%) 2,403 (29%) 56,443 (33%)
Figure 7: Consumer choice of accommodation payment by extra service status
Table 12: Lump sums value growth by extra service status – October 2014Extra Service Mixed Non Extra Service
September to October -5.0% 0.1% 1.7%June to October -7.2% 1.2% 4.4%
5 Extra service and non–extra service classifications are based on over 70% of care days being delivered to residents occupying an extra service place or a non–extra service place respectively.
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Part 2. Access to Care
IntroductionThe following section reports on the impact on access to care.
The 1 July 2014 changes introduced new means testing arrangements for home care and residential care and new accommodation payment arrangements in residential care. These both have the potential to impact on access to care.
Advice on the impacts of the means testing changes on access to care will be reliant on two factors:
Detailed analysis undertaken using administrative Departmental data on persons entering care; and
Information obtained through the Authority’s engagement with the sector.
It will take some time to build a suitably robust data set in this area, which will rely on collation of data concerning trends on entering care analysed against income and wealth information. This report includes some initial high level data on admissions and occupancy levels in residential care sourced from preliminary departmental data. ACFA will continue to build on this analysis in future reports as more detailed data and analysis become available.
ACFA has also continued to engage with the sector and the Department to obtain early feedback on implications in this area.
ObservationsWe note there has been a clear shift to an increasing use of respite care. While it is usual to see an increase in use of respite care in July through to September, the increased use for this year is markedly higher than usual. Feedback from the sector indicates this is the result of accommodating residents in respite care until the means testing results have been received. The delays in processing the means test are likely to have exacerbated this.
Even though respite admissions in October were lower than the previous month, it is still higher than expected based on trends from previous years. Patterns in admission practices will continue to be monitored and discussed in subsequent reports.
While there was a noticeable drop in permanent admissions in July and August, there had been a significant influx of permanent residents in May and June. The September and October admissions appear to be closer to usual levels. The number of permanent residents has returned to a similar level to earlier in the year.
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Post 30 June 2014 Admissions to residential careAs noted in previous reports, there was a spike in overall admissions to residential care pre 30 June 2014 – in May and June – followed by lower than usual admissions in July and August. An increase in respite admissions and fewer permanent admissions was also evident in July and August.
In September and October 2014, the number of permanent admissions returned to levels consistent with levels observed prior to May 2014. The spike in admissions in May and June and the trough in July and August has seen the total number of residents return to the same levels as seen in the first few months of 2014 with around 170,400 permanent residents.
Figure 8: Comparative admissions trend – July 2013 to October 2014
The number of respite residents remains relatively high. The number of claim days for respite care peaks in August each year (except 2014 where it peaked in September) and tapers down towards the end of the calendar year. Following 1 July 2014, this peak was significantly amplified and shifted to September. The number of claim days for respite in October was lower than September. If the post-May 2014 rise is transitional, then, it is expected that the number of respite admissions will continue to taper down in the next couple of months.
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Figure 9: Full–time equivalent respite residents (based on claim days) by month – 2009 to 2014
Note: The graph has been presented as full–time equivalent respite residents (claim days/number of days in month)
ACFA will continue to monitor these impacts in coming months to determine the extent to which issues are transitional or more systemic and ongoing.
Occupancy rates in residential careIn 2014, occupancy peaked in June, reflecting the pattern of admissions discussed earlier. Occupancy steadily declined marginally following this peak until October 2014. In October 2014, occupancy rose slightly over that of September, indicating that the rise in admissions is beginning to have an impact on occupancy rates.
Figure 10: Residential care occupancy trend – July 2013 to November 2014
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Figure 11: Residential care occupancy trend by state
Occupancy Rates in Home CareThe home care occupancy data relies on the claims data submitted by services. As at end of November claims processed for August, September and October as a proportion of all claims expected were 86%, 75% and 56% respectively. The home care occupancy results should therefore be treated with caution.
National occupancy rates in home care have been nearly stable, post 30 June 2014. Most States except Victoria, Queensland and Tasmania have experienced a slight decline post 30 June 2014 (see Figure 12). Only Victoria, New South Wales and the Australian Capital Territory recorded an increase in occupancy between September and October.
Figure 12: Home care occupancy trend by state
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When analysed by level, only level 3 seems to have experienced a steady growth post 30 June 2014. Occupancy at all other levels has remained fairly flat (see Figure 13).
Figure 13: Home care occupancy trend by level
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Part 3. Support for the sector and consumers in transition
Transitional Business Advisory Service (TBAS)The Government subsidises a free advisory service for aged care providers, with a particular focus on the impact of the new accommodation payment arrangements applying from 1 July 2014. A summary of the current usage of the service is below:
From commencement of operations on 3 April 2014 until 30 November 2014, there were 801 Tier 1 queries (basic advice provided over the telephone).
As at 30 November 2014, there were 40 applications for the more detailed Tier 2 services involving a desk audit of the provider’s position and readiness for the reforms and 25 applications for Tier 3 services providing a more highly detailed examination of their position and readiness, along with the provision of accompanying support and advice.
The most frequently asked questions (received as Tier 1 queries) are being collated with more general observations about transitional issues being faced by the sector and progressively published on the DSS website, and referenced in the reform implementation updates distributed to providers. This makes the information provided through TBAS available to the sector more broadly.
Reform InformationInformation on the reforms has been updated and made available on both the DSS website and the MyAgedCare website (www.myagedcare.gov.au), including a fee estimator. Consumers and providers can also contact the MyAgedCare call centre for information and assistance.
There have been some concerns expressed by the sector that some providers were unaware of certain new requirements around income testing and means testing arrangements. The relevant Departments have been updating information materials and sending additional communication materials to providers to address these concerns.
The DHS has made available a dedicated phone line for providers and consumers concerned over delays in means test assessments who can seek updates and expedition of urgent cases.
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Attachment – additional charts on admissions to residential careFigure A1: Residential care admissions trends (permanent and respite care) by state
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Figure A2: Residential care admissions (permanent care) trends by state
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Figure A3: Residential care admissions (respite care) trends by state
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